Alarcon, Raul, Jr.

(1956-)
Spanish Broadcasting System, Inc.

Overview

Raul Alarcon Jr. is the president and chief executive officer (CEO) of Spanish Broadcasting System, which owns and operates 26 Spanish–language radio stations across the United States.

Personal Life

Raul Alarcon Jr. was born in Camaguey, Cuba, in 1956 and moved to New York with his family as political refugees in 1960. His father, who started the first radio network in Camaguey, later worked as a disc jockey at WBNX–AM, a Spanish–language station in the Bronx, often bringing home stacks of cassette tapes. Even as a young boy, Alarcon would spend hours listening to and reviewing the music and giving his father advice on which songs should get air time.

Although Alarcon's parents started with very little, his father managed to fulfill his dream of buying his own radio station in 1983 when he purchased WSKO–AM in New York for $3.25 million. Thus began the family business of Spanish Broadcasting System (SBS). Alarcon admired his parents' hard work and determination, later saying, according to Hispanic magazine, "It is important to have a dream and hold it no matter what....If you can endure and persevere, you can achieve anything." In 1999 Alarcon was the recipient of the Governor's Award for Excellence, given by New York governor George Pataki.

Career Details

Working with his father to develop SBS, Alarcon took over as the company's chief executive officer and president in 1986, positions he continues to maintain. Alarcon, Sr., serves as the chairman of the board of directors. Over the first several years of the life of SBS, Alarcon and his father purchased five more stations, covering Hispanic markets in New York, Florida, and Los Angeles. In the fall of 1988, Alarcon spent $55.5 million to buy WSKQ–FM in New York, promoted as "Mega 97.9." The station, originally purchased from the Jewish Daily Forward newspaper, was reformatted to provide salsa and merengue music, targeting an audience of 18– to 34–year–olds. Fortune reported the acquisition, noting that Alarcon was not afraid of paying high prices and quoting Alarcon as saying, "Some people call me a crazy Cuban, but if you don't take calculated risks, you can't make huge gains." It appears that this risk, anyway, was a profitable one. In the summer of 1998, Mega 97.9 passed long–time market leader WLTW–FM, a light rock station, to become the leading station in metropolitan New York.

From the start, Alarcon sought numerous opportunities to expand his company; by 1998 SBS owned a dozen stations. In a 1998 interview with the New York Times, Alarcon said, "I am continuing to buy stations. We have built up a tremendous amount of equity." Sales for 1998 totaled $85 million, an increase of 27 percent from the previous year's $66.7 million. Profits were also up 16 percent to $39 million.

True to his word, Alarcon added significantly to the number of stations under the SBS umbrella. In 1999 SBS acquired three more stations, bringing the number up to fifteen, making it the second largest Hispanic–owned radio broadcasting company behind number one Hispanic Broadcasting Corporation. Also in 1999, Alarcon was in the middle of negotiations to purchase a group of eight radio stations in Puerto Rico at the same time that SBS completed an initial public offering (IPO). The transaction, in which 21.8 million shares were sold to the public, was the second largest such offering in the history of the radio broadcasting industry. The funds generated by the IPO—approximately $435 million—gave Alarcon the chance to push down some of the substantial high–cost debt SBS had acquired due to its rapid expansion into new markets and to provide cash to finance further expansion. Initially, the IPO was expected to raise $280 million, but the stock rose from $20 to $28, thus generating an additional $155 million.

Just weeks after the IPO was finalized, Alarcon talked about the experience with Stephen Lacey in an IPO Reporter article, "It's exhilarating and draining at the same time. Obviously it's a matter of great pride to complete the IPO." Alarcon's positive vision of SBS's future was clear: "We're looking very expectantly to what we can do in the future. Now my stock is desirable to many people that we have been talking to for years." According to Lacey, "Because of Spanish Broadcasting's strategically clustered stations, which reach 51 percent of the Hispanic population in the United States, there was strong investor appetite for both the company's stock and note offerings."

By the end of 1999, SBS had thirteen of its radio stations in five of the nation's largest centers of Hispanic population: Los Angeles, New York, Miami, Chicago, and San Antonio. During 1999, SBS also purchased an 80 percent stake in JuJu Media, which operates LaMusica.com, a bilingual Spanish–English web site that provides coverage of current trends and issues in Latin music, culture, entertainment, and news. On January 14, 2000, Alarcon announced the completion of the acquisition Primedia Broadcast Group, a subsidiary of AMFM Operating, Inc., which held rights to eight Puerto Rican radio stations. The deal was valued at $90.3 million; SBS financed the expansion venture with cash on hand. The transaction made SBS the largest Hispanic–owned radio broadcasting company in the United States.

Chronology: Raul Alarcon, Jr.

1956: Born.

1960: Immigrated from Cuba to New York.

1983: Alarcon's father purchased first radio station and formed Spanish Broadcasting System (SBS).

1986: Became SBS's president and chief executive officer.

1998: New York SBS station WSKQ–FM topped charts for the first time, beating out longtime leader WLTW–FM.

1999: Completed initial public offering.

1999: Received Governor's Award for Excellence from New York Governor George Pataki.

1999: Purchased LaMusica.com.

2000: Purchased group of eight radio stations in Puerto Rico.

2001: New York SBS–owned station WPAT–FM knocked off air by September 11 terrorist attack on World Trade Center.

In February 2000, SBS released financial statements that reflected a healthy 18.9 percent increase in net revenues in the first quarter of the fiscal year 2000. The profits reflected an increase of $4.6 million to $28.9 million compared to the same quarter of 1999, which showed a net profit of $24.3 million. Cash flow also increased by nearly 25 percent. In a company press release picked up by PR Newswire, Alarcon noted, "This quarter's results reflect our continued success in identifying and exploiting the revenue potential of major FM radio outlets in the largest U.S. Hispanic markets. Our management team continues to effectively translate overall Hispanic market growth into increased, sustainable operating profits." At the end of fiscal year 2000, SBS had 568 employees; the nearly 42 percent increase in numbers reflected the ongoing and substantial acquisition of new radio stations.

In November 2000, SBS reached an agreement with the International Church of the Foursquare Gospel to purchase KXOL–FM (formerly KFSG–FM). This addition gave SBS two major stations in the Los Angeles area—newly acquired KXOL–FM and already established KLAX–FM. KXOL–FM, dubbed "El Sol 96.3," kicked off with a sensational promotion of a summer of commercial–free broadcasting of music—a total of 50,000 songs in a row, completely uninterrupted. With its 50,000–watts of power, KXOL became the strongest radio signal in the market. Upon the announcement of the completion of the purchase deal, Alarcon declared in a press release carried by PR Newswire, "I am confident of the strategic role KXOL will play in the future growth of SBS and I very much look forward to delivering Los Angeles listeners and advertisers the very best that Spanish radio has to offer."

By mid–2001 SBS owned and operated 26 stations (a number that includes pending acquisitions) and had expanded into new Hispanic market arenas in San Francisco and Dallas. Also, SBS's Chicago station WLEY–FM was quickly becoming a major station. Acquired in 1997 and known as "La Ley 107.9," WLEY was dominating the Hispanic market in the Windy City within two years. It ranked first across all major demographics in both 2000 and 2001, and it placed sixth on the list of all Chicago radio stations regardless of format or language.

Despite all the positive forces working in his favor, Alarcon is not without challenges. According to Geraldine Fabrikant of the New York Times, SBS faces three significant obstacles: increased competition, lower than average advertising profits, and heavy debt. First, there has been a significant increase in competition, in part due to the Federal Communication Commission's deregulation of the radio industry that permitted companies to own multiple stations (up to eight) within a single market. In 1993 there were 365 radio stations with a Spanish–language format; by 1998 that number had grown to 454. As a result of more choices on the air, KLAX, SBS's older station in Los Angeles, went from being ranked first in 1994 for that market's segment to being rated eleventh in 1998.

The second obstacle—and perhaps more significant to the overall durability of the company—is the stature of Hispanic radio stations as second–rate citizens among advertisers. For example, in 1997 the premiere New York SBS station "Mega 97.9" placed third in terms of listeners but just thirteenth in terms of advertising revenues. Advertisers tend to prefer more mainstream audiences; however, the rapidly growing Hispanic population may push reluctant advertisers to reconsider.

Finally, due to Alarcon's strong commitment to growth and his willingness to take calculated risks, SBS incurred a significant level of debt, which places a constant drain on profits. In the early 1990s, SBS took on $175 million in high–cost debt and another $175 million in private stock that paid shareholders 14.25 percent in additional shares annually. By 1998 Alarcon was considering his options for addressing his company's debt load—bring in a financially valuable partner, go public (IPO), or sell outright. Although Alarcon hinted that he had received a $1 billion offer to purchase the company, instead he chose to complete the IPO. Even after the public offering, Alarcon continues to own approximately 41 percent of shares and retains 83 percent of the voting power, placing him firmly in charge of his company's future.

Social and Economic Impact

In his ongoing drive to build his company, Alarcon has taken advantage of a growing Hispanic population in the United States and the corresponding increase in Hispanic listeners. The Hispanic radio audience grew from 5 percent to 6.5 percent of the overall radio listening ratings. Considering the U.S. Hispanic population is growing at four times the rate of the general population and is expected to become the largest U.S. minority group by 2005, numbers of Spanish–speaking listeners are expected to continue to rise.

Alarcon has also made a concerted effort to raise the nation's level of awareness of the significance of the growing Hispanic population. In 1999 SBS joined in partnership with National Puerto Rican Day Parade, Inc., to broadcast what is traditionally known as the nation's largest parade. In a PR Newswire release, Alarcon stated, "We are truly honored to be able to form this strategic alliance with the National Puerto Rican Day Parade—the first national media partnership for the parade. SBS has supported the New York Puerto Rican Day Parade for the last decade, and is now proud to use its national chain to promote the organization's efforts on a national basis.'

Alarcon's company was affected by the terrorist attacks against the World Trade Center in New York on September 11, 2001. WPAT–FM, an SBS–owned station, sent its signal from a transmitter facility on the north tower of the World Trade Center. Soon after the first airplane crashed into the tower, the station was knocked off the air. Alarcon worked quickly with officials of the Federal Emergency Management Association and had the station back on the air in just 59 hours. Prior to reestablishing the transmission, WPAT announcers joined sister station WSKQ–FM staff, which operates from the Empire State Building. According to a PR Newswire report, Alarcon said, "Amid this national tragedy, it is vitally important to clearly signal to listeners our unwavering determination and steadfast commitment to serving them and our city."

Sources of Information

Contact at: Spanish Broadcasting System, Inc.
3191 Coral Way
Miami, FL 33145
Business Phone: (305) 441–6901
URL: http://www.spanishbroadcasting.com

Bibliography

Broadcasting & Cable, 1 November 1999.

Davenport, Carol. "Raul Alarcon Jr., 33 (On the Rise)." Fortune, 3 July 1998.

Fabrikant, Geraldine. "Spanish Broadcasting Builds on Growing Radio Audience." New York Times, 14 December 1998.

Lacy, Stephen. "Loan Helps Position Spanish Broadcasting for IPO." Bank Loan Report, 22 November 1999.

Lacy, Stephen. "Road Warrior Spanish Broadcasting Markets IPO, Debt Offering and Credit Facility." The IPO Reporter, 22 November 1999.

Muto, Henry. "Programming Pioneers." Hispanic, September 1995.

"National Puerto Rican Parade, Inc. and Spanish Broadcasting System Announce First National Partnership for the Nation's Largest Parade." PR Newswire, 10 March 1999.

"SBS Announces Ratings Gains at WLEY Chicago." PR Newswire, 25 July 2001.

"Spanish Broadcasting System Clarifies Report: Chairman Still Holds More Than 70 Percent of the Voting Power of the Company." PR Newswire, 2 December 1999.

"Spanish Broadcasting System Debuts New Spanish FM KXOL in Los Angeles." PR Newswire, 30 April 2001.

"Spanish Broadcasting System Finalizes Puerto Rico Acquisitions." PR Newswire, 14 January 2000.

"Spanish Broadcasting System, Inc. Reports Record First Quarter Fiscal Year 2000 Results." PR Newswire, 7 February 2000.

Torpey–Kemph. "SBS Teams With LaMusica.com." MediaWeek, 10 May 1999.

"WPAT–FM in New York City Returns to the Air." PR Newswire, 17 September 2001.